ȁȂǿ Partʺ: Economicsthan also to how readily they are finding customers. Notions of pure com-
petition lurk below the surface: the seller can sell all he desires at the going
price.
Ļeorists in this camp seem to believe that monetary expansion, for
example, and unexpected monetary expansion in particular, can have an
impact on real variables only through price changes—unexpected and
misinterpreted changes—and not directly, as by giving sellers more cus-
tomers. Ļe rival monetary-disequilibrium theory can interpret recovery
from depression in a more straightforward way than is available to a the-
orist unwilling to recognize disequilibrium in the first place.
Ļe idea seems to be afoot in certain circles (or was for a while) that
equilibrium modeling is the thing—the technically advanced thing—to
be doing in macroeconomics. Robert Lucas and admirers (LucasȀȈȇǿ,
pp.ȅȈȆ,Ȇǿȇ; WillesȀȈȇǿ, pp.Ȉǿ,Ȉȁ) recommended their brand of equilib-
rium economics for employing technical advances in modeling that simply
were unavailable a few years earlier.
Lucas and Sargent (ȀȈȆȇ, p.Ȅȇ) appeared to congratulate themselves
on the “dramatic development” that the very meaning of the term “equi-
librium” had undergone. Sargent (interviewed in KlamerȀȈȇȂ, pp.ȅȆ–ȅȇ)
expressed satisfaction with “fancier” notions of equilibrium, “much more
complicated” notions of market-clearing, and “fancy new kinds of equilib-
rium models.” Well, to recommend destabilizing the meaning of words,
subverting communication, is the kind of methodologizing that needs to
be dragged into the open and inspected.
Suggesting the influence of sheer commitment to a cherished theoret-
ical tradition, Herschel Grossman (ȀȈȇȂ, p.ȁȃǿ) wrote:
Ļe position that strict application of neoclassical maximization postu-
lates is relevant to macroeconomic developments only in the “long-run”
may seem reasonable from an empirical standpoint, but it puts neoclas-
sical economics in a defensive position. It suggests the possibility of a
general inability of neoclassical economics to account for short-run eco-
nomic phenomena.Yet despite the apparent implication here, disequilibrium is not incom-
patible with individuals’ efforts to maximize.
Ļe idea seems to be in circulation that an economist who talks about
disequilibrium is really talking not about market failure but about his own
failure as a model-builder. It is methodologically unfashionable to speak
of prices and quantities that are not at their equilibrium values but are only